Council waives late fee on earned income tax

Easton residents won't have to pay $20 for being behind, but do owe penalty interest

March 11, 2010|By Michael Duck | OF THE MORNING CALL

Thousands of Easton residents who are behind on their earned income taxes deserve a break, officials agreed Wednesday -- but only part of a break.

City Council voted Wednesday to waive the $20 fee that was to be owed by as many as 4,000 city residents who hadn't had the earned income tax withheld from their 2009 paychecks at the city's new, higher rate. However, they still owe penalty interest.

If their employers didn't withhold the tax at its new rate of 1.75 percent, residents were obligated to pay quarterly estimated payments during the year to make up the difference, or else they were to face 1-percent monthly penalty interest and the $20 administrative fee, charged by Berkheimer Tax Administrator, the company that collects the tax.

Despite months of mailings about the change, many residents are learning about them only now that they're sitting down to do their taxes, officials have said. Berkheimer has estimated that Easton can expect to receive about $1 million in overdue 2009 earned income taxes in April, according to city Finance Director Chris Heagele.

Though those taxpayers still owe the interest, council's decision means they won't have to pay the fee as long as they pay all the 2009 taxes they owe by April 15.

''The fee is often higher than the penalty [interest],'' City Administrator Glenn Steckman said Wednesday. ''So people had thought they were getting penalized twice.''

Many face penalty interest of about $3 or $4, Steckman said, though collectively the interest adds up to about $75,000.

In December 2008, City Council agreed to raise the city's earned income tax rate from 0.5 percent to 1.25 percent to help close a $2.6 million gap in the 2009 budget. Added to the Easton Area School District's 0.5 percent earned income tax, city residents' total local income tax is 1.75 percent.

Mayor Sal Panto Jr. in January had proposed waiving both the interest and the fee. But on Heagele's advice, council's Finance Committee agreed two weeks ago to waive the fee but not the interest, as a reward for people who filed quarterly payments or worked with their employers to get the correct amount withheld.

The fee waiver applies only to 2009 taxes. The resolution approved Wednesday doesn't say what would happen for taxpayers who have already paid the fee, but Heagele has previously said they should get the $20 back in the form of a credit toward their 2010 taxes.